By Simon J Evenett of the University of St Gallen
Three reports on protectionism have recentyly been published in as many weeks: by the WTO , by the European Commission (EC), and by the independent Global Trade Alert, which I coordinate. What do these reports reveal about the sectors at greatest risk of 21st century protectionism? What do they mean for businesses operating internationally and for investors? Read more
** FT News **
* Opec decision hits energy shares | Crude price plunge sparks warnings of capital spending cutbacks
* New Brazil finance minister sets targets | Appointment of no-nonsense economist expected to stabilise economy Read more
Nobody expected more than a status quo budget from Zimbabwe finance minister Patrick Chinamasa when he presented his plans for 2015 this week. With revenue declining and the economy expected to flatline to growth of 3.2 per cent in 2015 after 3.1 per cent this year, the minister had little room to manoeuvre.
In 2015 both revenue and spending are projected at 28 per cent of GDP, virtually unchanged from the current year, tax changes are minor and the pattern of state spending remains skewed unsustainably in favour of public service wages. Although the government was committed to reducing its wage bill from 81 per cent of total spending to around 60 per cent by 2014, Chinamasa says this is not an option and the wage bill problem will only be resolved “in the medium to long term”. Read more
By Ben Payton, Maplecroft
Africa’s booming economic performance over the past decade has seen GDP growth jump from an average of 2.5 per cent a year in the 1990s to 6 per cent a year since 2000. Asia’s insatiable demand for raw materials and the subsequent commodity price hikes have spawned an array of costly extractive projects on the continent, and investment and consumer demand are on the rise.
However, a growing reliance on borrowing, combined with the downturn in commodity prices points to a deteriorating outlook for many of the continent’s key growth markets in the medium term. Read more
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** FT News **
* Germany acts on Russia’s Balkan designs | Putin’s visit to Serbia viewed as part of ambition to extend the Kremlin’s influence
* China told $6.8tn in investment ‘wasted’ | Stimulus moves and lack of oversight blamed as abandoned projects and ‘ghost cities’ mar landscape Read more
By Timothy Ash of Standard Bank
A new initiative by the government of Viktor Orban in Hungary appears to be “right-sizing” the country’s banking sector, boosting its efficiency and cost effectiveness as a means to kick start lending. The agenda also appears to be to promote the development of a domestically owned banking sector – 70 per cent domestic ownership is being targeted. To achieve this, state ownership is being promoted as a short term measure to help deliver on the longer term plan.
Reviewing this programme, the obvious question is, what are the Hungarian authorities trying to achieve? Read more
By Taras Kuzio of the University of Alberta
US President Barrack Obama dare not utter the word ‘invasion’ and asks his advisers why Ukraine is so important. Russia denies it has troops in eastern Ukraine while Ukraine itself describes its own military actions there as an “anti-terrorist operation”. In reality, Europe is witnessing a war that is producing casualties for the Russian army on a scale not seen since the Soviet invasion of Afghanistan. It is time to recognise it as such. Read more
Economists and investors have turned optimistic about the Indian economy since Prime Minister Narendra Modi took over in New Delhi this May.
Sweeping to victory with a strong majority, the new Bharatiya Janata Party (BJP) administration is expected to roll out a series of policy reforms that will kick start growth in Asia’s third largest economy. But has this triggered a boom in the Indian consumer sector too? Read more
China’s new charm offensive in Asia – using infrastructure development to garner soft power at the expense of rivals US and Japan – has reached new heights in recent weeks. Multi-billion US dollar deals with strategic partners such as Sri Lanka and Pakistan aside, even countries with reservations about China’s rise have begun taking a more pragmatic view toward using China’s huge foreign exchange reserves to their benefit.
Earlier this month, Indonesian leaders travelled to Beijing seeking to tap financing for power and transport projects, notwithstanding the new administration’s strong emphasis on both national and maritime security. Chinese companies are challenging Japanese bids for high speed rail contracts in Malaysia and Thailand. This week, a team from Indian Railways flew to Beijing to discuss a potential Delhi-Chennai high speed rail link.
Yet in spite of the huge stashes of money available in Beijing, Chinese financing for existing energy projects in Vietnam – an economy with high dependency on China – has been all but frozen as a result of bilateral tensions over the South China Sea, according to research by Asean Confidential, a research service at the Financial Times. Read more
“The Ant and The Grasshopper”, one of Aesop’s darker fables, is a cautionary tale about forward planning. An industrious ant works hard all summer to lay up enough food to survive the winter, while a feckless grasshopper makes merry in the sun. When the cold weather comes, the ant survives and the grasshopper starves.
The chill winter winds of falling crude prices are blowing for the world’s oil exporters, who have seen the price of their product slide by 30 per cent since the summer. Today, the members of OPEC are meeting in Vienna to consider a cut in production. Oil exporters have proved to be a mixture of ants and grasshoppers, with some of the idler insects of previous decades now having learned the virtues of hard work. How well their economies – and asset prices – survive is likely to depend not just on whether they have saved enough of their earnings to smooth domestic demand, but whether their broader economies and political systems are strong enough to take the strain.
** FT News **
* Oil tumbles as Opec cut seen less likely | Brent crude drops to new four-year low of $75.48
* China overtakes Japan in stock market cap | In 2010 China’s economy overtook Japan’s as the world’s second largest. This week the country’s stock market has caught up. Read more
By Marius Toime of Berwin Leighton Paisner
Chimed Saikhanbileg, Mongolia’s incoming prime minister, must do more than simply continue the policies of his predecessor, ousted amid accusations of economic mismanagement and corruption.
His election by parliament last week, after Norov Altankhuyag was removed by a vote of no confidence, leaves big question marks over whether he can bring about real change. The opposition People’s Party boycotted his election, fearing that he will let the country drift without fresh leadership and put investment, jobs and income at risk. Read more
** FT News **
* Wall Street high fails to spur Asia rally | But China equities on pace for 6th consecutive daily rise
* Merkel offers Russia trade olive branch | German chancellor aims to ease tensions amid claims her Ukraine policy is too tough Read more
By Monica Baumgarten de Bolle of the Woodrow Wilson Center for International Scholars
President Dilma Rousseff’s soon to be announced new finance minister may mark an important shift in Brazil’s faltering macroeconomic framework: From the ill-fated experimentalism that culminated in the so-called “New Economic Matrix”, brain child of Minister Guido Mantega, to newfound orthodoxy. From a failed model based more on ideology than economics to more rational policymaking, this is what one should expect from Joaquim Levy’s appointment, widely expected to be confirmed on Thursday. How long it all lasts is another matter altogether. Read more
It was close, but they didn’t make it. The political fixers of Brazil’s government had hoped to push through a bill on Wednesday that would have removed its obligation to meet a target of a primary fiscal surplus (before debt payments) of 1.9 per cent of GDP in this year’s budget.
The hope was that the bill would have been passed in time for the expected announcement on Thursday of a new economics team, widely tipped to be led by Joaquim Levy as finance minister. Success would, in a way, have swept out the old team’s jiggery pokery over public accounts before ushering in the new brooms of team Levy. Now it will just have to be done after the event. Read more